Legislative Overview: Police Body Cameras

By Danny Restivo

In the wake of several controversial police shootings, local, state, and federal law enforcement agencies have begun using body-worn cameras. Twenty-four states have approved or introduced body-worn camera regulations dictating when and where they can be used, while 25 have approved or proposed guidelines for accessing the footage.

Several studies have shown departments with cameras experience fewer incidents of confrontation and complaints against officers. However, a recent study by the Urban Institute discovered that body cameras do not consistently lead to less confrontation. In fact, the study shows that body-worn cameras may lead to more encounters with the public. While researchers and policymakers debate the pros and cons of police officer cameras, lawmakers see both the benefits and dangers of increased police surveillance.

laws-dictating-when-and-where-body-cameras-can-be-usedIn 2015, President Barack Obama’s Task Force on 21st Century Policing issued a report that said technology could strengthen police relationships with all communities, while improving accountability among officers. As a result, the Department of Justice’s Bureau of Justice Assistance has helped law enforcement organizations around the country implement body-worn camera policies, practices and evaluation methods. With the DOJ program, the federal government has created a body-worn camera framework for police departments to follow, but it remains incumbent upon state authorities to create standards and guidelines, as well as enforcment polices. Additionally, an increase in body-worn cameras highlights concerns regarding the privacy of innocent victims and witnesses.

In Pennsylvania, the challenge of balancing public safety with government transparency has played out in the legislature and the courts.

State Senator Stewart J. Greenleaf of Montgomery County (R) introduced a bill that would revise the state’s wiretapping law and allow officers to leave their camera on while entering a private residence. If approved, the legislation could also let police departments refuse public requests for copies of audio or video by officers, unless a court order is issued. Meanwhile, the Supreme Court of Pennsylvania recently heard a police surveillance case stemming from a 2014 traffic accident in State College. Officers initially denied a request for video from a police dash cam by a passenger in the victim’s vehicle, but a lower court overruled. Police have argued that releasing surveillance video could compromise investigations, while potentially exposing innocent people to unnecessary scrutiny. Depending on the court’s ruling, a precedent for body-worn police footage could get cemented.

Moreover, a recent story by the Associated Press revealed that 10 out of 25 requests for police surveillance videos in Pennsylvania were denied. In each case where release was refused, police cited a need to protect investigative information, as well as the identity of private citizens. Under the Commonwealth’s Right to Know Law, news groups say they should have access to police videos in an effort to keep government accountable.

Whether it’s requirements for body camera use, funding, data storage, eavesdropping or releasing to the public, police camera policies vary in every state.

In Texas, police departments can charge for a copy of a body camera video. According to a November announcement from the Texas Secretary of State, police can charge $10 for each recording, as well as an additional fee of $1 per minute of footage if an identical copy hasn’t been released. Texas law doesn’t require police departments to release body camera footage, and can only do so “if it furthers law enforcement purpose.”

In South Carolina, where certain officers are required to wear body-worn cameras, recorded footage is exempt from the state’s public records law. While South Carolina has issued guidelines for departments to follow, local jurisdictions have a great deal of autonomy on camera policy. For example, local police chief’s can decide when cameras should be activated, what restrictions there are for recording, how long recordings should be retained and who is permitted to review the recordings.

In March, Florida Governor Rick Scott (R) signed a bill requiring law enforcement agencies using body-worn cameras to follow certain guidelines. The law does not require local departments to use cameras, however.  It does build off a previous law that exempts the release of footage taken inside a residence, hospital, mental health facility or social services building. North Dakota approved a similar law in 2015.

Some police departments have come into conflict with the amount of time they are required to store video because of the costs it can incur. In late June, after Indiana approved a law requiring departments to store video for 190 days, a police department in Clarksville, located in southern Indiana, ended their camera program. The Clarksville police chief said the increased data storage would cost the department an extra $50,000 a year. The police chief, who mandated cameras in 2012, said paying for the body cameras was less burdensome with a 30-day requirement. Several other police departments in the Hoosier State followed suit.

A similar story played out in Berlin, Conn., where the police chief ended his department’s body-worn camera program after the state mandated 90-day storage, and up to four years if it was considered evidence.

While local police departments and state legislatures navigate the challenges of police body-worn cameras, the Department of Justice believes this technology can benefit everyone. In September, U.S. Attorney General Loretta E. Lynch announced $20 million in funding to help 106 state, city, tribal and municipal law enforcement agencies establish body-worn camera programs. With the increased funding, more law enforcement agencies—as well the residents who interact with them—will encounter challenges as local and state government’s aim to increase police transparency and accountability.

Snapshot of States with Body Camera Regulations

California—The state has passed laws requiring police departments to consider certain best practices for body-worn cameras. However, two bills aimed at increasing police transparency have failed in the statehouse. Currently, few police departments in California release body-worn camera video unless it’s court ordered. The state has strict laws preventing law enforcement information from becoming public.

Connecticut—Certain special police forces and any municipal police department receiving a state grant are required to use body-worn cameras when interacting with the public. The release of recordings is banned when it involves victims of domestic abuse, suicide, homicide or a fatal accident.

Illinois—Requires officers wearing cameras to ensure they’re on at all times, unless a victim or a witness of a crime requests otherwise. Illinois law excludes body camera data from the Freedom of Information Act, except when the data is flagged due to the filing of a complaint, a firearm is discharged, use of force occurs, or a victim or witness gives their permission for the video’s release.

Maryland—State law requires a police training commission to establish body camera policies and guidelines, including public accessibility and procedures for review. In March, the Baltimore police department announced that it would equip all its officers with body-worn cameras by 2018. The city has deployed its own program with footage available to the public through a request from Maryland’s Public Information Act.

Nevada—State law requires highway patrol officers who interact with people to wear body cameras, as well as enacting procedures for their use. Nevada law also stipulates that public requests for video can be made on a per incident basis and are available for inspection where the video is stored.

New Hampshire—In June, Governor Maggie Hassan (D) signed a bill establishing body-worn camera regulations for all departments, including when a camera should be activated and for how long the footage must be stored. Police are required to activate cameras when arriving at a call for service, while citizens, under certain circumstances, can decline recordings. If the camera is not activated, the officer must document the reason for doing so. The cameras can’t be used during intimate searches, interviews with crime victims, while on school grounds (unless there is a threat to life). Recordings are exempt from the state’s open records law, unless instances where police use of force, discharge a firearm, or where they engage in a situation that leads to a felony-level arrest.

New Jersey—The state requires certain personnel and vehicles to house a “mobile surveillance device.” In 2015, the state attorney general distributed $2.5 million for police departments to purchase body-worn cameras.

North Carolina—A bill signed by Governor Pat McCrory (R) in July stipulates who can view police footage. Only a person, or their representative, whose image or voice appears in the video can request access to view the video. All other requests must be made through a court order.

Oregon—State law requires police departments to develop procedures for body camera use. When appropriate, an officer wearing a body camera must notify people they encounter. Laws must align with the state’s eavesdropping laws.

States with Laws Dictating When and Where Body Cameras Can Be Used

Connecticut, Illinois, Maryland, Nevada, New Hampsire, New Jersey, Oregon, South Carolina, Utah and Virginia.

(States with proposed legislation)California, Florida, Georgia, Indiana, Kansas, Massachusetts, Missouri, North Carolina, Ohio, Pennsylvania, Tennessee, Texas, Vermont and Washington.

States with Laws Restricting Public Access to Footage

Connecticut, Illinois, Maryland, Nevada, New Jersey, New Hampshire, North Carolina, North Dakota, Oklahoma, Oregon, South Carolina, Texas and Virgina.

(States with proposed legislation) – California, Florida, Indiana, Iowa, Kansas, Massachusetts, Michigan, Minnesota, Missouri, Ohio, Tennessee and Washington.

laws-restricting-public-access-to-footageStates requiring consent

Florida, Georgia, Illinois, Maryland, Masschusetts, Michigan, Montana, Nevada, New Hampshire, Oregon, Pennsylvania and Washington (all states have exemptions in certain circumstances).

2016 Cannabis Ballot Initiative Results

2016 has been a landmark year for the Cannabis industry. Ballot initiatives to legalize various forms of Cannabis (marijuana) were held in nine states during the 2016 general election. Ultimately, residents in eight of nine states decided to support cannabis legislation in some form or another. Voters in Maine, California, Nevada and Massachusetts approved recreational marijuana use, while residents in Arizona rejected a similar proposal. In Arkansas, Florida, North Dakota and Montana, residents voted in favor of legalizing medical marijuana (MMJ).  Following the election, the number of states with legalized forms of cannabis has increased to:

  • 30 states including Washington, DC and Puerto Rico with medical marijuana
  • 8 states plus Washington, DC with recreational marijuana

However, the Cannabis industry is watching President-Elect Trump’s transition into the White House with great reservation. Several key nominees have a less-than-friendly history towards the industry and observers have concerns that the federal prohibition may tighten even as more states move to legalize. Thus far, all signals from the administration have indicated that states’ rights will be upheld and more states are expected to make moves towards legalization in 2017.

cannabis-ballot-initiatives

Recreational Initiatives

Arizona—Failed

On November 8, Arizona was the only state to reject an initiative that would allow 21-year-olds to possess up to one ounce of marijuana, and grow up to six plants in their home. Voters rejected the proposal with 52 percent of the vote and more than 2 million ballots cast. Prior to the election, polls showed even sentiment. Both sides shelled out nearly $6 million in advertisement and campaigning. Republican Senator John McCain voiced support for Prop 205, but Republican Governor Doug Ducey openly opposed it. Based on exit polls and surveys, many “no” voters questioned the regulatory environment and the projected tax revenue.

California—Approved

Voters overwhelmingly supported Proposition 64, which allows consumers to carry up to an ounce of pot. An adult can now grow six plants at home and purchase eight grams of concentrate. Fifty-six percent of Californians approved the ballot measure, making marijuana legal for nearly 23 percent of America’s population. Prop 64 also allows licensed stores to sell marijuana, with the state aiming to issue licenses throughout 2017. Legal marijuana means a large and lucrative market is now available to growers, and investors are gearing up to make a significant sum of money. However, state regulations and laws have not been specified and many are waiting for the fine ink to dry before making a large investment.

Maine—Approved

Voters in Maine approved marijuana legalization by less than one percent—four thousand votes—on November 8. However, because the decision was so narrow, the Maine Secretary of State authorized a recount. The State now plans to recount more than 700,000 votes.  If the recount confirms the vote, the initiative will legalize, regulate and tax marijuana, and allow 21-year-olds to purchase and possess up to 2.5 ounces of marijuana, more than twice the legal amount in Oregon and California. Although retail businesses or social clubs aren’t expected to open for another year, legalization for personal cultivation will take effect on December 10. Question 1 also allows non-medical marijuana to be sold by state-licensed and locally-approved businesses. Maine officials say it will take nine months to issue licenses for recreational retailers.

Massachusetts—Approved

53.6% of voters in Massachusetts approved “Question 4. The initiative calls for legalizing marijuana while regulating it in a manner similar to alcoholic beverages. A commission will be created to regulate marijuana in the state. Marijuana is currently permitted only for medical use in Massachusetts. It is projected to be an economic boon to the entire New England region.

Nevada—Approved

Fifty-four percent of Nevada voters approved recreational marijuana legislation. Question 2 legalizes recreational use, possession, cultivation and sale of marijuana to anyone 21 and over.  On January 1, 2017, Nevada residents will legalize the possession of up to 1 ounce of marijuana. Nevada lawmakers must now implement a regulatory framework throughout the next year. All revenue from a 15-percent sales tax on marijuana will go towards regulatory efforts, as well as  substance abuse and support education. Regulators will develop licensing procedures, requirements, product testing, packaging, record keeping and revenue collecting procedures.

Medical

Arkansas—Approved

Four years after rejecting an MMJ initiative, Arkansas approved it this November. Arkansas’s approval of MMJ is a significant indicator that attitudes towards MMJ in the bible belt are changing drastically. With roughly 53 percent of the vote, residents of the Natural State passed medical marijuana usage for 17 medical conditions. Issue 6 prohibits the Arkansas legislature from making marijuana illegal, while placing MMJ under the control of Arkansas’ Alcoholic Beverage Control, and a yet to be created medical marijuana control commission. The state projects roughly $2.5 million in additional annual tax revenue. Ninety percent would go to a vocational training fund and the state’s general revenue fund. The remaining 10 percent allocates to the Alcoholic Beverage Control Administration Division, the Alcoholic Control Enforcement Division, the Medical Marijuana Commission. The amendment stipulates the commission will create eight cultivation facilities and 20-40 dispensary locations. The commission will limit an individual to one dispensary or grow operation, but Issue 6 opponents fear MMJ licenses could turn into a pay-to-play system.

Florida—Approved

The Sunshine State approved a constitutional amendment with more than 70 percent of the vote, giving Floridians the right to MMJ. Amendment 2 permits MMJ for those suffering from a debilitating illness as determined by a physician. In November 2014, Florida voters supported the initiative with roughly 58 percent support. However, Amendment 2 was an initiation to change a constitutional amendment, which required 60 percent of the vote. To pass in 2016, Amendment 2 had to clear the same hurdles. Amendment 2 also includes several more ailments than the 2014 amendment, including cancer, epilepsy, glaucoma, HIV, PTSD, ALS, Crohn’s disease, Parkinson’s disease and Multiple Sclerosis. Based on various estimates, roughly 450,000 voters may be eligible for MMJ. While the Department of Health will regulate MMJ in one of the largest markets in the country, they have not determined how much enforcement or administration will cost, nor do they have a precise tax revenue figure.

North Dakota—Approved

With more than 63 percent of the vote, North Dakota residents approved MMJ for certain debilitating ailments. Measure 5’s approval comes four years after residents rejected a similar proposal.  Under the 2016 legislation, Measure 5 makes it legal to possess up to 3 ounces for treatment for roughly a dozen conditions. The North Dakota Department of Health will partner with law enforcement to regulate and enforce violations. The Department of Health is also charged with issuing licenses for distribution facilities and selecting nonprofit organizations that can serve as dispensaries. Under Measure 5, dispensaries will operate under a limited model with 1,000 plants and 3,5000 ounces of “usable” marijuana. According to projections from the North Dakota Legislative Council, the Department of Health could receive up to $4.8 million in revenue from 2017-2019. Though the council said operating expenditures could exceed up to $7.4 million. Government officials believe it will take a year to provide a regulatory framework and issue licenses for distribution.

Montana—Approved

Voters in Montana approved a mandate that expands an existing MMJ law with 54 percent of the vote. In 2004, voters approved MMJ, but state legislators administered new regulations (SB 423) in 2011 that strictly limited dispensaries and users. Senate Bill 423 restricted medical marijuana advertisements, the amount of users a dispensary served and the number of patients a doctor can recommended marijuana to. The ballot initiative, I-182, removes provider limits on the number of patients a doctor treats, as well as the dispensary requirements. The law also permits grow operations to hire employees for cultivation, dispensing requirements and MMJ transportation. Moreover, the law also prevents law enforcement from conducting unannounced inspections of MMJ facilities.

Danny Restivo and Brett Goldman Contributed to this Report

 

 

Legislative Outlook: Online Sales Tax

By Danny Restivo

As the holiday season nears, many shoppers will purchase gifts without ever leaving their home. The convenience of e-commerce has led to tremendous popularity, accounting for more than a third of all retail sales in the United States. According to the U.S. Commerce Department,  online sales totaled $341 billion in 2015, a 14.6 percent increase from 2014 when figures totaled $298 billion.

The explosive growth of e-commerce has made shipping giants, such as Amazon, a lucrative target for states seeking tax revenue. However, tracking and collecting sales tax from online purchases has created certain challenges. Currently, most states operate off the precedent set under the Supreme Court’s 1992 ruling in Quill Corp. v. North Dakota. The court ruled states could only collect sales tax on an item if the out-of-state seller has a physical presence, known as a nexus.  If there is no nexus, consumers must pay the tax themselves. Yet, roughly four percent of online buyers pay the respective state’s sales tax, according to estimates.

Since 2009, twenty-nine states have enacted legislation geared toward taxing online commerce in an attempt to level the playing field with brick and mortar stores. As one of the largest e-commerce companies in the world, Amazon has become the scapegoat for state legislatures trying to enact online sales tax. Yet when states did enact an “Amazon tax”— which labeled distribution centers and affiliate locations as a physical space—the company threatened to leave unless tax abatements or incentives were offered. In 2015, when Ohio enacted an Amazon tax, the state agreed to waive sales tax on all equipment purchases made by Amazon for three facilities within the state. Ohio also sweetened the deal with $81 million in tax incentives. In 2010, Texas asked Amazon to pay $269 million in back taxes from 2005 to 2009 after online sales tax legislation was approved. As a result, Amazon closed its only distribution center within the state. The site reopened after the Texas Attorney General agreed to forgive the back taxes, and Amazon said it would create 2,500 jobs and invest $200 million in distribution centers. Similar agreements have played out in Illinois, California and South Carolina.

While Amazon has received headlines for opposing an increase in state taxes, eighty-five percent of the online retail purchases occurred within the top 1,000 retail stores in America. Most of these stores have a large physical presence and online taxes are easy to track. For smaller internet-based operations, an increase in sales tax could limit or end growth opportunity.

Questions still remain over online sales tax rates, especially when interstate exchanges occur between states with differing tax policies. Many states have tax exemptions for a variety of items, as well as different guidelines for the location of the buyer and seller. Furthermore, five states—Alaska, Delaware, Montana, New Hampshire and Oregon—do not have a sales tax, while Alaska does permits local sales taxes and Delaware has a rental and use tax. The current patchwork may allow online companies to game the system with tax havens in certain states, or provide an unfair advantage to businesses in other states.

Several pieces of congressional legislation were crafted in an effort to assuage the situation.  In the past three years, Congress debated two items: the Marketplace Fairness Act of 2013 and the Remote Transactions Parity Act of 2015. Both would have given states the right to levy taxes on businesses without a physical location, but proposals floundered in a House dominated by anti-tax Republicans. Critics, including former House Speaker John Boehner (R-OH), cited the laws ability to tax outside a state’s legal jurisdiction. Sen. Ted Cruz (R-TX) called the Marketplace Fairness Act, which was sponsored by Rep. Steve Womack (R-AR), “a job-killing tax hike, plain and simple. It is, in effect, a national Internet sales tax, which would hammer the little guy and benefit giant corporations.”

In August, House Judiciary Chairman Bob Goodlatte (R-VA) introduced draft legislation titled the Online Sales Simplification Act of 2016, which would allow states to tax online items regardless of physical presence. Goodlatte’s proposal allows taxes on remote sales (interstate sales), with the tax rate established by the buyer’s state. OSSA would establish a tax clearinghouse where states would receive disbursements of sales tax collected by remote sellers.  Using a “hybrid-origin” approach, each state in the clearinghouse would set its own online sales tax, which sellers are required to collect from buyers in their respective state.

For example, if Joe were selling iPhone accessories in Ohio to 10 people in Maryland, he would use the remote sales tax rate in Maryland for all the items, instead of creating 10 separate rates. In the current system, Joe would have to include local and special rate tax for each item’s destination. With OASSA’s clearinghouse, Joe would place a uniform sales tax for Maryland on all the items. If those items were tax exempt in Maryland, Joe would not have to include it.

This online sales tax policy raises a lot of questions, including how do sellers in states with sales tax deal with buyer’s in states without sales tax, and vice versa. Furthermore, how do sates deal with buyers in states not participating in the clearinghouse? Under the current draft, participation in the law is optional. Ultimately, the law does attempt to level the playing field between small and big business, which has drawn applause from some the world’s biggest retail supporters.

Following the proposal, Joe Rinzel, senior vice president for government affairs for the Retail Industry Leaders Association of America, released a statement saying, “retailers have worked earnestly with Chairman Goodlatte for several years to resolve this issue. While retailers welcome today’s action by the Chairman to move the process forward, we will continue to press for changes that achieve true parity at the point of sale.”

Goodlatte has already met with several leaders in the GOP-dominated House and Senate to discuss his proposal. Senate Majority Leader Mitch McConnell (R-KY) has expressed interest in passing online sales tax legislation before the year is out.

While federal lawmakers push e-commerce regulatory policies, several states have already introduced online sales tax reform. In 2016, seventeen states proposed sales tax legislation, while four states—Washington, South Dakota, Louisiana and Oklahoma—have already enacted legislation. Meanwhile, Tennessee, Arizona, Utah and Colorado are among states to have all updated provisions on the topic.

In 2016, Louisiana lawmakers approved legislation that allowed officials to tax Internet businesses with no physical presence inside its jurisdiction. Act 22 also requires out-of-state businesses with affiliates in Louisiana to remit taxes on sales made to residents. The law specifically affects Internet entrepreneurs, like popular youtube accounts, bloggers, podcasts and others who typically link or refer customers to online retailers like Amazon, before receiving a kick back from the company. Those media entrepreneurs must now remit taxes on all referral payments in the state. In Oklahoma, House Bill 2531, which was approved in May, expands the definition of online retailers who have to pay sales tax. The law goes beyond the requirement of a “physical presence” and includes any retailer selling items in Oklahoma, including Amazon.

While brick and mortar retailers applaud online sales tax efforts, consumers could see legislative efforts from a different perspective. Not only would an online sales tax increase prices, it will also encroach on consumer sovereignty. Ultimately, many consumers will end up paying taxes approved by legislators or governors outside their legal jurisdiction. Furthermore, if a federal policy is approved, there’s little chance legislation will support a more competitive environment. As a result, there will be little incentive for states to keep sales tax low.

If OSSA legislation is approved by Congress, the existing patchwork of online legislation would remove the “nexus” requirement set by the court in 1992, creating the groundwork for a uniform federal tax policy. Although, the results of a tax clearinghouse still remain uncertain. If a national clearinghouse is established without overwhelming participation, it could be a serious challenge for Internet entrepreneurs. Mid to small-sized internet businesses will be stuck navigating a challenging world of tax laws, without the benefit of a large lobbying effort on their behalf. While discussions between lawmakers continue, many Internet companies, no matter their size, are hoping for a law that will keep their organization competitive.

 Other States with Notable Online Sales Tax Regulations

Alabama

In November, Alabama began collecting and remitting an 8-percent sales tax on all online retailers as part of the state’s Simplified Use Tax Remittance Program Act of 2015. The law allows online retailers to opt into a fixed transaction tax rate, rather than paying state and local sales taxes. The fixed transaction rate allows for a 2-percent discount on taxes collected by the seller. More than 75 businesses have participated in the program, while legislators have promised not to raise the current tax on any member who joins, even if federal legislation is enacted.

Colorado

In January 2016, Amazon announced that it would begin to collect a 2.9-percent sales tax on all online purchases. Previously, it was up to the consumer to pay the sales tax, while the retailer simply had to remind the purchaser of their duty. Amazon’s decision comes on the heels of a 2014 Department of Revenue report that said the state was losing more than $170 million annually. Additionally, a 2015 lawsuit by the Direct Marketing Association highlighted concerns by retailers and lawmakers. The lawsuit wants to ensure that all out-of-state sellers in Colorado report their sales and purchases.

 Michigan

In October 2015, Michigan began collecting a 6-percent sales tax on all online purchases. The law mandates that anyone with a physical presence in Michigan must pay taxes.

Mississippi

In November, Mississippi Attorney General Jim Hood asked the Supreme Court to overturn the 1992 ruling in Quill Corp. v. North Dakota. In a release, Hood said, “If local stores are unable to compete with out-of-state online retailers, we lose jobs, an important tax base and a critical investment in our communities. We’re asking the Supreme Court to even the playing field for merchants and to allow the states to gain the revenue that should be due to them.”

South Dakota

Governor Dennis Daugaard signed S.B. 106 into law in March, forcing online businesses that sell more than $100,000 worth of goods in South Dakota, or process more than 200 orders, to pay sales tax. The law also states that volume of sales dictates “a presence.”

Tennessee

The Volunteer State has the highest average combined rate of state and local taxes, roughly 9.46 percent. In August, Governor Bill Haslam proposed legislation that would level the online sales tax environment between in-state and out-of-state businesses. The law would require out-of-state businesses to collect and pay taxes if their sales exceed $500,000 in Tennessee. In 2014, the state approved its own Amazon tax, which levied a 9.25-percent sales tax on all Amazon purchases.

 

Daily Fantasy Sports Legislation

By Danny Restivo

The word “fantasy” may elicit images of children’s games, but in the sports world it has become synonymous with profit. For the past decade, fantasy sports leagues for football, baseball, basketball and hockey have generated $3 billion in annual revenue. Since 1988, fantasy sports participation has grown exponentially, from roughly 500,000 to nearly 57 million in 2016, according to data from the Fantasy Sports Trade Association.

Fantasy sports leagues are organized by informal groups of friends or strangers. Each league member selects their own players, creating an imaginary team that competes against other participants. In recent years, sites like DraftKings and FanDuel—known as Daily Fantasy Sports—allow players to compete with each other online. These sites charge fees for all users and doles out money to the respective winners. Both FanDuel and DraftKings hold roughly 90 percent of the DFS market in the United States. In late October, ESPN reported that both companies intended to merge by 2017.

In 2006, Congress exempted fantasy sports from an online gambling ban, saying skill was the primary factor for success. However, FanDuel and DraftKings came under fire last year for breaking state gambling laws and advertising misleading information. In November 2015, New York Attorney General Eric Schneiderman ordered FanDuel and DraftKings to cease all operations within the Empire State. Schneiderman cited a failure to obey gaming laws while promoting competition that relied heavily on chance rather than skill.

Under Schneiderman’s order, New York became the sixth state to ban both FanDuel and DraftKings (Arizona, Iowa, Louisiana, Montana and Washington have all banned DFS). The attorney general’s decision highlights the major challenges of DFS, as well as the friction between state and federal gambling laws. With 600,000 users, there is more DFS participation in the Empire State than anywhere else in the United States. Schneiderman said the companies had raked in nearly $200 million from customers, but only 12 percent of its customer base had made any money, which ran contrary to FanDuel and DraftKings’ marketing and advertising.

Both FanDuel and DraftKings had limited their operations in other states when legislative pressure heated up, but they decided to fight Schneiderman’s order in New York.

With the enlistment of lobbying efforts, their persistence ultimately paid off. The New York Assembly introduced a legislative measure that was eventually signed by Governor Andrew Cuomo in August, while the Attorney General litigated with FanDuel and Draft Kings. The approved regulation enforces taxes, controls advertisement, and implements safeguards to keep experienced players from competing with inexperienced amateurs. The state taxes are projected to add $4 million to New York’s education fund.

In October, the New York Attorney General reached a court settlement with FanDuel and DraftKings. The settlement forced both companies to pay $6 million for advertising false information. The agreement stipulates that each company must now “maintain a webpage that provides information about the rate of success of users in its contests, including the percentage of winnings captured by the top 1 percent, 5 percent or 10 percent.”

While the settlement did cost DraftKings and FanDuel $6 million, New York’s new regulations are a boon for DFS companies, who see the regulatory model as an example for other states to follow. In light of these regulatory pathways, rumors of a merger between DraftKings and FanDuel have surfaced. If a merger does occur, it would eliminate the statehouse battles each company has to fight separately. The Fantasy Sports Trade Association, in conjunction with DraftKings and FanDuel, has supported legislative efforts in 16 states that carve out legal protection for DFS operators.

However, DFS laws around the United States remain decidedly diverse:

  • Similar to Schneiderman’s order, Attorney Generals in Alabama, Delaware, Hawaii and Illinois have made statements labeling DFS illegal under state law.

Meanwhile, representatives in those states have introduced DFS-friendly legislation:

  • The Attorney General’s office in Texas and Georgia have both issued opinions stating DFS as “potentially illegal.” As a result, FanDuel left the Lone Star State while DraftKings remains, but both companies still operate in Georgia after the attorney general decided not to pursue legal action.
  • In New Jersey, legislators have classified DFS as a “game of chance,” but have not pursued legal action against any company.
  • While legislators approved DFS in Florida, federal prosecutors in the Sunshine State have convened grand juries to investigate certain sites for illegal gambling activity.

As of September, eleven states permitted DFS while thirteen have proposed legislation. However, there are 10 states that have approved DFS, but currently face scrutiny from lawmakers. “This regulatory patchwork could strengthen support for uniform DFS policies around the country” says Eric Martins, DMGS Managing Director,  “As fantasy sports enthusiasm continues to rise, state legislators and lawmakers throughout the country are likely to further modify gaming regulations.”

Sates with Approved DFS Legislation

Colorado

House Bill 1404, which was approved in May, allows 18-year-olds to participate in DFS. However, Colorado law does not allow DFS for college sports. The bill also creates a Colorado Office of Fantasy Sports, which aims to set guidelines and prevent an illegal gambling outfit.

Indiana

Governor Mike Pence signed SB 339 in March, which permits DFS for professional sports, but restricts participation in high school or college sports. The law also establishes the Paid Fantasy Sports Division of the Indiana Gaming Commission. The law require DFS operators to pay a $50,000 registration fee before they can operate within the state. Critics say the registration fee will give Draft Kings and FanDuel a monopoly within the Hoosier State.

Kansas

In May 2015, Governor Sam Brownback signed HR 2155 into law. The regulation stipulates that DFS is a game of skill. Prior to the law, there was no mandate differentiating DFS and other forms of gambling.

Massachusetts

In March, Attorney General Maura Healey announced a series of regulations for DFS. Players must be 21 years old and interactions between experienced and inexperienced players are strictly limited. The law also bans college sports and enforces a monthly cap of $1,000 on all players.

Mississippi

In May Governor Phil Bryant signed Senate Bill 2541, which legalizes DFS until July 2017. Bryant’s signature overrules an earlier state law that bans DFS. The measure also creates a task force that will deliver regulatory recommendations to the Governor.

Missouri

Governor Jay Nixon signed House Bill 1941 in June. The bill exempts daily fantasy sports from state gambling regulations, while enforcement falls under the jurisdiction of state gaming officials. DFS operations must pay the Missouri Gaming Commission an application fee of $10,000 and an annual fee of 11.5 percent of the operator’s net revenue in Missouri from the previous year, or $11,500 annually.

Rhode Island

In February 2016, Rhode Island Attorney General Peter F. Kilmartin announced daily fantasy sports were legal under state law. Kilmartin recommended legislators create a regulatory framework, but the state assembly has yet to send one to the Governor’s desk.

Tennessee

In April, Governor Bill Haslam pushed through a bill that exempts DFS from anti-gambling laws. Haslam’s law legalizes cash-based fantasy contests and overrides a ruling made by the previous attorney general.

West Virginia

Attorney General Patrick Morrisey issued an opinion in April stating that DFS was permissible under state law because fantasy sports are a game of skill, not chance. The West Virginia Lottery Commission said it would oversee DFS, but would wait to recommend any regulations or laws.

Virginia

In March Governor Terry McAuliffe signed the Fantasy Contests Act, which requires DFS operators to pay a $50,000 licensing fee and register with the Department of Agriculture and Consumer Services. Furthermore, DFS operators must undergo two independent audits every year, while banning DFS employees from participating in public contests.

States with Proposed DFS Legislation

Connecticut, California, Florida, Kentucky, Michigan, Minnesota, Nebraska, New Jersey, New Mexico, Oklahoma, Pennsylvania, South Carolina and Wisconsin.

States with No DFS Legislation

Alaska, Arkansas, Maine, New Hampshire, North Carolina, North Dakota, Ohio, Oregon, Utah and Wyoming.

States with Contested Legislation

Alabama, Delaware, Georgia, Hawaii, Idaho, Illinois, Nevada, South Dakota, Texas and Vermont

States that Have Banned DFS

Arizona, Iowa, Louisiana, Montana and Washington

Sources

http://www.wsj.com/articles/fantasy-sports-industry-mounts-lobbying-blitz-1455585446

http://fsta.site-ym.com/?page=Demographics

http://deadspin.com/new-york-ag-orders-draftkings-and-fanduel-to-stop-takin-1741816882

http://www.foxbusiness.com/features/2016/11/02/legal-sports-gambling-americans-weigh-in.html

https://techcrunch.com/2016/08/03/new-york-governor-signs-daily-fantasy-sports-bill-draftkings-and-fanduel-can-operate-again/

https://techcrunch.com/2016/06/18/new-york-has-passed-a-bill-legalizing-daily-fantasy-sports/

http://www.ag.ny.gov/press-release/ag-schneiderman-announces-12-million-settlement-draftkings-and-fanduel

http://www.denverpost.com/2016/03/27/colorado-wants-to-regulate-daily-fantasy-sports-leagues-and-theyre-ok-with-that/

http://www.indystar.com/story/sports/2016/03/24/daily-fantasy-sports-law-fanduel-draftkings-mike-pence/82205488/

http://www.washingtontimes.com/news/2015/may/4/kansas-lawmakers-poised-to-consider-fantasy-sports/

https://www.bostonglobe.com/business/2016/03/25/massachusetts-finalizes-new-rules-for-fantasy-sports-bans-college-games-players-under/POXUtUYBN2ITD2tqIRPs0O/story.html

http://watchdog.org/265477/daily-fantasy-sports/

http://www.ri.gov/press/view/26769

http://www.providencejournal.com/news/20160718/reining-in-fantasy-sports-6-states-act-to-regulate-games-but-ri-others-did-not

http://www.espn.com/chalk/story/_/id/14799449/daily-fantasy-dfs-legalization-tracker-all-50-states

http://www.wvgazettemail.com/news-cops-and-courts/20160711/fantasy-sports-betting-legal-in-wv-ag-says

http://www.theverge.com/2016/3/7/11176006/virginia-daily-fantasy-sports-law-draftkings-fanduel

http://www.forbes.com/sites/marcedelman/2016/10/29/why-antitrust-regulators-could-block-a-draftkings-merger-with-fanduel/#4bbe3e585c52

http://finance.yahoo.com/news/draftkings-fanduel-dfs-legal-states-000000560.html

PA House and Senate Leadership Results

Pennsylvania State Senate

The PA Senate Republicans and Democrats held their Leadership Elections on 11/16/16. There were no changes in Senate Leadership. The following is the complete list of the results:

 Title Majority Minority  
 

Interim President Pro Tempore

 

Leader

 

Joseph Scarnati

 

Jake Corman

 

 

 

Jay Costa

 
 

Whip

 

John Gordner

 

Anthony Williams

 
 

Caucus Chair

 

Bob Mensch

 

Wayne Fontana

 
 

Caucus Secretary

Richard Alloway Lawrence Farnese
 

Appropriations Committee Chair

Patrick Browne Vincent Hughes  
 

Caucus Administrator

 

Charles McIlhinney

 

John Yudichak

 
 

Policy Committee Chair

 

David Argall

 

Lisa Boscola

 

Pennsylvania State House

The PA House Republicans and Democrats held their Leadership Elections on 11/15/16.  The only changes were in Republican Leadership positions as Democratic Leadership stayed the same;  Appropriations Chair (formerly Bill Adolph who is retiring) is replaced by Stan Saylor (York); Caucus Administrator, currently held by Brian Ellis who lost to Kurt Masser (Northumberland); and Caucus Chair (formerly Sandra Major who is retiring) is replaced by Marci Toepel (Montgomery).  The following is the complete list of the results:

 Title Majority Minority
Speaker-Designee

 

Leader

Mike Turzai

 

Dave Reed

 

 

Frank Dermody

 

Whip

 

Bryan Cutler

 

Michael K. Hanna

 

Caucus Chair

 

Marci Toepel

 

Dan Frankel

Caucus Secretary Donna Oberlander  

Rosita C. Youngblood

Appropriations Committee Chair Stan Saylor  

Joseph F. Markosek

 

Caucus Administrator

 

Kurt Masser

 

Neal P. Goodman

 

Policy Committee Chair

 

Kerry A. Benninghoff

 

P. Michael Sturla

 

 

 

DMGS’s Harrisburg PA Team Compiled this Report

Weekly Washington DC and Healthcare Policy Update

Election 2016

In what is being referred to as an historic upset, Donald Trump (R) defeated Hillary Clinton (D), winning 279 electoral votes. Clinton garnered only 228, falling far short of polls expectations. Totals in Arizona, Michigan, and New Hampshire remain too close to call. Arizona & Michigan will likely be won by Trump, with New Hampshire going to Clinton.

In the Senate & House, Republicans lost a handful of seats, but securely retained their majorities in both chambers. The Senate is currently 51 Republicans to 48 Democrats, with a run-off election for the Louisiana Senate race being held in early December.

House Republicans are likely to have a majority of at least 241, with Democrats flipping only a few districts in Illinois, New Jersey, New Hampshire, & Nevada.

In the hours after Donald Trump’s election as the 45th president of the U.S., Republicans in Congress claim a mandate for their agenda to revamp financial rules and replace Obamacare, and Hillary Clinton urged her supporters to give him a chance to govern.

Tax Revamp Optimism Reigns Among Ways and Means Republicans

House Ways and Means Committee Republicans are optimistic that 2017 might finally be the year to pass legislation overhauling the tax system—or, at least, the international side of the tax code. With majorities in the House and Senate, tax-focused leadership in both chambers and a tax proposal the committee pushed out last year, Republicans hope the time has come to eliminate some of the complexity in the tax laws in favor of lowering rates for corporations and individuals.

Short-Term Health Plans Cut to Under Three Months in New Rule

Short-term health plans bought by as many as a million people that do not comply with the Affordable Care Act must be limited to less than three months under a final rule issued Oct. 28 by three agencies. The short-term plans currently are limited to less than one year. They must end by Dec. 31, 2017, under the final rule (RIN:0938-AS93) from the Department of Health and Human Services, Department of Labor and the Internal Revenue Service. The plans are popular in states that have not expanded Medicaid under the ACA because they cover fewer benefits and cost less.

Court Rejects Challenge to Party ‘Soft Money’ Limits

A federal court rejected a challenge to the last major element of the McCain-Feingold campaign finance law, refusing to scrap restrictions on unlimited “soft money” contributions to political parties (Republican Party of La. v. Federal Election Commission, D.D.C., No. 15-cv-1241, 11/7/16). The Nov. 7 ruling by a special three-judge panel of the U.S. District Court for the District of Columbia sets up the case for a direct appeal to the Supreme Court.

The ruling, which was written by U.S. Circuit Judge Sri Srinivasan, said courts have upheld soft money restrictions of McCain-Feingold—also known as the Bipartisan Campaign Reform Act, or BCRA—in a series of cases going back to the 2003 Supreme Court ruling in McConnell v. FEC. The campaign finance law was passed in 2002 and is named for its primary sponsors, Sen. John McCain (R-Ariz.) and former Sen. Russ Feingold (D-Wis.). “We are not the first court to consider First Amendment challenges to BCRA’s limits on state and local political parties’ use of soft-money donations,” Srinivasan wrote in a 20-page opinion. “We see no salient distinction between the First Amendment claims rejected in those cases and the challenge presented here.”

Srinivasan’s decision was joined by the other members of the court panel: U.S. District Judges Christopher Cooper and Tanya Chutkan. The ruling upheld BCRA provisions that set a $10,000 “hard money” annual limit per contributor on the amount a state party committee can raise for activities that could influence a federal election.

More Time, Links to States Sought Under EPA Energy Incentives

A federal plan to spur new renewable energy and energy efficiency programs in support of carbon dioxide reductions from the power sector will require more time and methods to link with existing state programs, state officials said. Even supporters of the Environmental Protection Agency’s Clean Energy Efficiency Program, which rewards states for energy efficiency efforts and renewable energy investments in disadvantaged communities in 2020 and 2021, questioned how effective the program would be in comments on the proposed rule.

“If allowances were based on energy savings/generation accruing over a longer time frame (for example, from project commissioning through 2030 rather than just in 2020 and 2021), which would be demonstrated through standard protocols for modeling savings/generation, individual projects would see more compelling value in [Clean Energy Incentive Program] participation,” officials from the Massachusetts Departments of Environmental Protection, Energy Resources and Housing and Community Development said in comments on the EPA’s proposal. The Clean Energy Incentive Program (RIN:2060-AS84) would provide states with additional credits for every megawatt-hour of electricity demand reduced through energy efficiency in low-income communities beginning Sept. 6, 2018, and for each megawatt-hour of zero emissions generation for projects that begin commercial operation after Jan. 1, 2020. The credits can be used toward compliance with the Clean Power Plan, which limits carbon dioxide emissions from the existing fleet of fossil fuel-fired power plants. The comment period on the proposed incentive program closed Nov. 1.

The additional emission rate credits would be generated for 2020 and 2021, before the Clean Power Plan, which has been stayed by the U.S. Supreme Court, is intended to take effect. State regulators argued that is not sufficient time for significant investments in renewable energy or energy efficiency programs for low-income communities, which could hamper the incentive program’s effectiveness. Several states called on the EPA to extend the period during which programs could qualify for the additional credits, including giving states credit for programs that are already in place to accomplish those goals. “States, especially smaller ones, like West Virginia, simply cannot divert resources to developing and implementing an entirely new bureaucracy for a program that has only a two-year life and will provide relatively minor environmental benefit,” the West Virginia Department of Environmental Protection said in its comments. West Virginia has led legal challenges against the EPA’s Clean Power Plan.

USDA to Tighten Food Safety Inspections in 5-Year Plan

The Agriculture Department office tasked with inspecting meat, poultry and eggs for foodborne pathogens is set to expand its testing as part of its five-year strategic plan. In its report, the Food Safety and Inspection Service laid out a broad agenda that would increase inspections, toughen food safety standards, and expand processes for evaluating imported food products covered by the agency.

“FSIS is expanding the breadth, depth, and frequency of its sampling to better address gaps in testing for pathogens and chemical residues in FSIS-regulated products,” the agency said in the Nov. 4 report. The agency plans to toughen pathogen reduction standards, increase the percentage of establishments at which FSIS collects samples and streamline its testing process to reduce duplication, the report said.

The agency said it will put a priority on large-scale facilities like retail and warehouse locations. “With several hundred to thousands of in-commerce facilities that handle FSIS-regulated products in every State, FSIS, with State and local regulatory agencies, must strategically utilize regulatory resources to maximize coverage and efficiencies to ensure that food remains safe as it moves through the supply chain from production to actual consumption,” FSIS said.

FSIS said it would also update its method for estimating illnesses attributed to products the agency inspects, making the data less sensitive to year-to-year fluctuations. “These updates will provide greater transparency and understanding regarding the pathogens causing the majority of estimated illnesses, facilitating a more detailed assessment of agency progress,” FSIS said.

SCOTUS May Choose Senate in Advice and Consent Fight

A fight over the president’s power to fill temporary vacancies without the advice and consent of the Senate played out at the U.S. Supreme Court Nov. 7 (NLRB v. SW General, Inc., U.S., No. 15-1251, argued 11/7/16). The parties agree that Congress passed the 1998 Federal Vacancies Reform Act to regain the power it had lost when presidents from both parties flouted the previous law’s requirements, including by appointing their desired nominee to a lower position and then allowing them to serve as the “acting” official. However, the parties disagree on whether a person serving in an acting capacity may continue to serve after being nominated to fill the role permanently.

The justices seemed to lean in favor of requiring nearly all acting officials to step aside while their permanent nomination is being considered—not just a limited few. All eight of the lower court judges who have looked at the issue have decided it that way, Justice Anthony M. Kennedy said. Conspicuously missing from Monday’s argument was the Senate itself. SW General Inc., the losing party in a National Labor Relations Board proceeding over unfair labor practices, brought the challenge to the president’s authority.

Medicare Appeal Backlog Could Be Cleared by 2019, HHS Claims

The multiyear backlog of Medicare administrative appeals could be cleared up by the end of fiscal year 2019, according to an HHS filing in federal district court (Am. Hosp. Ass’n v. Burwell, D.D.C., No. 1:14-cv-851, opposition brief filed 11/7/16). The Health and Human Services Department asked the U.S. District Court for the District of Columbia Nov. 7 not to intervene in the appeals process, seeking dismissal of a case brought by the American Hospital Association (AHA) and three regional hospitals. The hospitals want a court order requiring the HHS to implement procedures designed to curtail the extensive appeals backlog they say is caused by the recovery audit contractor program. The AHA is expected to reply to the HHS filing in the case by Nov. 15.

The AHA has claimed the agency’s Office of Medicare Hearings and Appeals (OMHA) must, by law, resolve appeals within 90 days. However, as of February 2015, appeal resolution stretched to an average of 572 days and caused the HHS to suspend all new appeals for two years. According to the Nov. 7 filing, the HHS has worked to reduce pending appeals by 26 percent and to stem the tide of incoming appeals in an effort to cut down on the delay. The appeals backlog has grown as providers are challenging decisions by the HHS and its contractors to deny reimbursement for treatment of Medicare and Medicaid patients.

According to the HHS, the OMHA faces 658,307 pending appeals as of Sept. 30, 2016—down from 886,418 from a year earlier—and expects to reduce that number even further in the coming year. To support its projection that the backlog could be reduced to zero by 2019, the HHS points to administrative settlement programs and increased funding from the proposed Audit & Appeals Fairness, Integrity, and Reforms in Medicare (AFIRM) Act of 2015, a bill pending in Congress.

Cures Bill Likely Delayed by Democrats’ Drug-Pricing Demands

Democrats plan to oppose any effort to pass a new version of the 21st Century Cures Act unless it includes some policies targeting drug pricing. Leaders on the House Energy and Commerce Committee are seeking a new deal to enact the Cures bill during the lame-duck session, set to start Nov. 14. The bill, which is an effort to speed new drugs and devices to market, has support from House leadership, but any opposition from Democrats on the Senate Health, Education, Labor and Pensions Committee could prevent it from reaching the president’s desk.

Progressive think tanks and unions have stepped up their lobbying efforts in recent weeks to encourage Democrats to seek drug-pricing concessions from Republicans. Further clouding the Cures Act’s future is rising disagreement over possible changes to a Food and Drug Administration program that affects how generic drugs enter the market. The House version would extend the exclusivity period by six months on an FDA-approved drug or biological product that treats a rare disease or condition.

Conservatives have supported some drug-pricing measures, but it is unclear what agreement the two sides could reach by the start of the next session. Democrats want any final Cures bill to include some policies that facilitate access to affordable drugs and funding for the cancer “moonshot,” an effort to double the rate of progress in cancer research led by Vice President Joe Biden.

The House passed the bill in summer 2015, but the legislation has been held up in the Senate over disagreements on its multibillion-dollar price tag. Further complicating the matter, more than a dozen groups—including the Center for American Progress, the AFL-CIO and Public Citizen—sent a letter Oct. 26 to Democratic leaders in the House and Senate asking them to delay passing Cures until 2017.

Obamacare Cases in Limbo Following Republican Wins

The legal landscape for Obamacare-related litigation is uncertain following Republicans’ election-day sweep

The cases range from challenges to rules implementing the Affordable Care Act’s essential coverage provisions to insurers’ demands for payments allegedly due them under the ACA’s premium stabilization programs, known as the three Rs.

The stakes are high. Health care is a $3 trillion, heavily regulated industry. Government policies—and court decisions—affecting how providers get paid and how Americans access care are crucial to its future. President-elect Donald J. Trump said he would ask Congress to repeal Obamacare. The proposal would prompt a filibuster in the Senate, where Democrats retained enough votes to block it. Congress, however, will do its best to scale back the Affordable Care Act in budget reconciliation proceedings. Republicans are expected to keep some popular provisions, like those prohibiting insurers from denying coverage based on pre-existing conditions and requiring continued coverage for young adults up to age 26. While essential coverage provisions may survive, but the Trump administration could gut rules implementing them, like the contraceptive mandate, and the individual mandate, premium tax credits and Medicaid expansion “are all on the table”.

House Republicans Shunned in Obamacare Risk Corridor Suit

House Republicans Nov. 7 lost a bid to introduce a new defense into a health insurer’s suit seeking billions in unpaid Obamacare risk corridor funds (Health Republic Ins. Co. v. United States, 2016 BL 371062, Fed. Cl., No. 16-cv-259C, 11/7/16). The Department of Justice’s exclusive control over litigation involving the U.S. prevented the House from entering Health Republic Insurance Co.’s suit on the government’s behalf, the U.S. Court of Federal Claims said.

The court denied the House’s Oct. 13 request to file a friend-of-the-court brief in which it argued insurers couldn’t recover the money because the Affordable Care Act’s risk corridor program was meant to be budget-neutral (200 DER, 10/17/16). There are 11 cases pending in which insurers are trying to recover up to $5 billion in risk corridor money. The DOJ raised the same argument as the House in later-filed suits, but not in Health Republic’s purported class action.

CMS Seeking Input on How to Expand Medicaid Home Care Program

The CMS wants input on expanding a Medicaid program to help beneficiaries stay in their homes instead of institutional settings. The Centers for Medicare & Medicaid Services Nov. 4 said it wants input on the reforms needed to expand Medicaid’s home and community-based services. The agency requested comments in a notice (RIN:0938-ZB33) set for Nov. 9 Federal Register publication.

The home and community-based services programs provides individuals requiring personal care, respite care and other services the opportunity to receive those services in their own homes or in the community, instead of nursing homes or other institutional settings. Growth of the program means Medicaid now spends more on home and community-based services than it does on institutional care. In fiscal 2014, 53 percent of the $152 billion spent nationally on Medicaid’s long-term support services was for home and community-based services. The rate spent on home and community-based services (HCBS) in the late 1990s stood at roughly 25 percent, the notice said.

More than 3.2 million Medicaid beneficiaries received home and community-based services in calendar year 2012. This is a growth of almost 1 million individuals since 2002. Comments (using code CMS-2404-NC) are due Jan. 9.

John Zang Contributed to this report

Recreational Marijuana Ballot Initiatives

By Danny Restivo

Support for legalized Marijuana in the United States is growing nearly as fast as its profits. With recreational marijuana legal in Colorado, Washington, Oregon, and now Alaska, sales have projected to hit $4.3 billion in 2016, according to the Marijuana Business Daily’s 2016 factbook. Some experts have even predicted a $22 billion industry by 2020. These figures have attracted state’s and investors hoping to cash in on a lucrative revenue source. In November, voters in four states—Arizona, Massachusetts, California Nevada, and Maine—will decide whether to permit recreational marijuana (REC). All of these states currently allow Medical Marijuana (MMJ), which they hope to integrate into their regulatory framework. If voters approve their respective initiatives, it could further legitimize cannabis’ economic value.

In light of these ballot proposals, the Drug Enforcement Agency announced in August that marijuana would remain a schedule 1 narcotic under the Controlled Substance Act. Written in 1970, the Controlled Substance Act categorizes marijuana—as well as heroin, ecstasy, and other narcotics—as a “drug with no currently accepted medical use and a high potential for abuse.” In their announcement, the agency cited a need to further study and research the benefits of Marijuana. The DEA’s decision comes after the Department of Health and Human Services recommended moving the drug from a schedule 1 classification to a schedule 3 classification, which would acknowledge its health benefits and make it easier to prescribe. Currently, doctors can only “recommend” cannabis to patients in a state with medical marijuana.

To help stymie the potential for prosecution, President Obama issued a memo in 2009 to federal prosecutors encouraging them not to prosecute medical marijuana operations that are in accordance with state law. In 2013, after Colorado and Washington had passed laws legalizing marijuana, the Department of Justice announced an update to their marijuana enforcement policy. The announcement stipulated that marijuana would remain illegal under federal law, but they expected states like Colorado and Washington to create “strong state-based enforcement efforts…” Ultimately, the DOJ reserved the right to challenge their policy, but they maintained “they wouldn’t do it at this time.”

As a result, the four states with marijuana ballot proposals in 2016 have mirrored their legislation off the legal cannabis markets in Colorado, Oregon, Washington and Alaska. All stipulate that 21-year-olds can legally purchase and possess up to an ounce of pot. However, cultivation policies, tax rates, state revenue and the distribution of those funds all differ. Here’s a glimpse at the current marijuana regulatory framework in place.

States with Recreational Marijuana

Alaska

Alaska became the third state to legalize marijuana after voters approved Measure Two in 2014. Since then Alaska has established a Marijuana Control board, which has adopted regulations for packaging, distribution, store locations and edibles. The agency has enacted a $50 per ounce tax on marijuana cultivators, as well as 25 percent excise tax on retail cannabis.  The state’s Department of Revenue expects to collect $12 million annually. Roughly half of that money will go towards Alaska’s Department of Correction’s Substance Abuse Treatment Program, the Department of Health and Social Services and the Department of Public Safety. In July, Governor Bill Walker signed a bill that would allocate half of the excise tax to programs aiming to reduce prison recidivism. Regulators are expected to strictly monitor taxes and fees when retail stores come online in late 2016.

Colorado

Since approving recreational marijuana in 2012, Colorado has served as a bellwether model for other states looking to adopt recreational or MMJ programs. Colorado has issued 1,303 medical licenses for stores, grow sites, product manufacturers and testing facilities. On October 1, 2016, the state issued new guidelines to limit the THC concentrate in edibles and marijuana fluids and waxes.

Colorado’s cannabis market is monitored by the Marijuana Enforcement Division of the Department of Revenue. The state’s policy allows adults to grow up to six plants at home, three of which may be flowering. Colorado charges a 15-percent tax on wholesale marijuana prices, plus a 10-percent tax on sales, which will drop to 8 percent in 2017. Furthermore, local municipalities can add additional charges or taxes. In Denver, a customer pays roughly 21 percent in taxes on a retail cannabis purchase. In 2014, the state collected $59 million in taxes, fees and licenses, while the revenue increased to $135 million in 2015. That revenue is roughly once percent of the state’s entire budget. Thirty-five million dollars of the 2015 revenue went to the public education system, while the remaining revenue was redistributed into the marijuana enforcement division.

Washington

Unlike Colorado and Alaska, Washington does not allow personal cultivation, which is considered a felony under the new law. The state also has limits the amount of marijuana-infused edibles or liquids someone can purchase or possess. Washington imposes a 37-percent excise tax on all retail marijuana sales, a gross receipt tax from the state Business & Occupation (B&O), a 6.5 percent sales tax, plus local sales taxes. In its first full year of legal use (July 1, 2015 to June 30, 2016) the state collected $62 million in excise taxes, $10 million in state sales taxes, $1.3 million in state B&O taxes, and $3.6 million in local sales taxes on $157 million in retail sales, according to Washington State’s Liquor and Cannabis Board. Forty percent of that money will go to the state’s general fund and local budgets, while the remaining 60 percent is earmarked for substance abuse prevention, research, education, and health care. In January 2016, the WSLCB announced that it would increase the number of marijuana retail stores from 334 to 556. With an increase in retail operations, the state has projected $136 million in collecting taxes.

Oregon

In Oregon, it’s legal to possess one ounce of marijuana in public, while it’s ok to keep up to four plants at home.  After legalizing recreational pot in 2014, the state’s liquor control commission began overseeing Oregon’s marijuana retail stores. The commission established a 17-percent tax on the retail price of recreational marijuana, which will go into effect in late 2016. Until then, the state has collected a 25-percent excise tax. In August, the Department of Revenue reported $25.5 million in sales tax revenue from the state’s 309 dispensaries. As part of the state’s regulatory policy, local governments can adopt ordinances that add up to 3 percent in sales tax.

The state expects it will collect roughly $44.4 million in marijuana taxes throughout 2016. Roughly $12 million is earmarked for the state’s regulatory efforts. Forty percent of the remaining funds will go to education, 20 percent to mental health and substance abuse, 15 percent to the Oregon state police, 10 percent to local law enforcement and 5 percent to Oregon Health Authority.

Washington, D.C.

In 2014, voters approved an initiative to legalize Marijuana. However, a month later congressional Republicans inserted a clause into the city’s budget that prevents any federal funds from regulating legalized cannabis. When local legislators attempted to create a regulatory framework, they were threatened with fines. As a result, there is no legal sale or distribution of pot in D.C. however Marijuana consumers can have up to two ounces and  grow up to six plants, but smoking in public is strictly prohibited.

States with Recreational Marijuana Initiatives on the Ballot in 2016

California

Proposition 64 would allow consumers to carry up to an ounce of pot, while also allowing a person to grow six plants at home and purchase eight grams of concentrate. If proposition 64 is approved, market experts believe California—which is home to 23 percent of America’s population—will send a strong message to other state’s debating recreational cannabis. Furthermore, recreational marijuana would be completely legal on the West Coast. The initiative’s support campaign has raised roughly $17 million, most of which originated from Silicon Valley investors. By comparison, the opposition has raised roughly $250,000.

According to a Public Policy Institute of California poll taken in May, 60 percent of Californians support the legalization of Marijuana. The proposal would create a new Bureau of Marijuana Control, which will work with the Department of Consumer Affairs, the Department of Public Health and the Department of Food and Agriculture to help monitor the industry.

The measure will also establish a 15-percent sales tax as well as a cultivation tax of $9.25 per ounce for flowers and $2.75 per ounce for leaves, with exceptions for qualifying medical marijuana sales and cultivation. According to some projections, the state could collect up to a $1 billion a year in tax revenue. The proposal has loosely outlined how states and localities may implement the measure, as well as how the tax revenue will get distributed to state and local agencies.

Arizona

Proposition 205 would allow a 21-year-old to possess up to an ounce of marijuana, and grow up to six plants in their home. Recent polls have showed voters are evenly split on the issue. Republican Senator John McCain has voiced support for Prop 205, while Republican Governor Doug Ducey opposes the initiative. If approved, the state would create a Marijuana Commission that would further establish transportation, manufacturing and retail guidelines for pot. Marijuana would receive a 15-percent sales tax, while 80 percent of the generated revenue would be directed to education with the remaining 20 percent going to the Department of Health services. Projections on tax revenue have been as high $130 million to as low as $55 million.

Maine

If approved in November, Question One will have the least strict marijuana guidelines in the United Sates. The state would allow 21-year-olds to purchase and possess up to 2.5 ounces of marijuana, more than twice the legal amount in Oregon and California. The law would also allow adults to grow up to 12 plants, as long as no more than six have flowered. Furthermore, Maine’s proposed 10 percent sales tax is far less than other regulated states. Projected estimates believe the state could generate an additional $9 million, 98 percent of which would go to the general fund while two percent would go to Maine’s Local Government Fund.

Governor Paul LePage and Attorney General Janet Mills have both expressed opposition to the proposal. However, a recent poll from the Bangor Daily News shows 55 percent support for the law, while 40 percent oppose it.

Massachusetts

Like other states, Massachusetts’ Question Four would allow adults 21-years and older to purchase an ounce of cannabis, or five grams of concentrate. Residents would be allowed to grow six plants at home, with a maximum of 12 per household. Question Four would establish a cannabis control commission to help regulate cultivation, testing, manufacturing and retail. Experts believe a marijuana market within the state has the potential to generate $100 million in sales. The state has proposed a 12-percent tax; 6.25 percent would be a sales tax and 3.75 percent would be an excise tax used to fund the commission’s operating budget. The remaining two percent would go to the locality where the marijuana was purchased.

Republican Governor Charlie Baker, Boston Democratic Mayor Marty Walsh and Attorney General Maura Healey all oppose the measure. However, a poll by Ballotpedia shows a majority of support among likely voters.

Nevada

Like other Western states, Nevada’s Question 2 would allow 21-year olds to purchase and possess up to an ounce of marijuana, while allowing 1/8 of an ounce of liquid concentrate. Efforts to legalize marijuana failed within the statehouse in 2013 and 2015. However, proponents believe they have a better shot for approval via statewide vote. The measure calls for a 15-percent excise tax on wholesale marijuana sales in addition to other sales and use taxes. The proposal is also calling for variety of licensing fees, which could span from $3,000 to $30,000 depending on the operation. While the state hasn’t projected any numbers for tax revenue, a report commissioned by proponents suggests the industry will bring in more than $464 million in tax revenue between 2018 and 2024. If the measure is approved, that money will go to the Department of Taxation and local municipalities for administration and regulation costs, and leftovers would go to the state’s general education fund.

According to Ballotpedia, only one poll on the issue exists, but it supports Question 2 with support at 50 percent, while opposition hovers at 41 percent. Democratic Senate candidate Catherine Cortez Masto and Sen. Harry Reid have both voiced opposition to the legislation, as well as the Nevada Resort Association—the chief lobbying arm of the Las Vegas casino industry. More importantly, Republic Governor Brian Sandoval has also voiced opposition, which may create more hurdles if the proposition is approved by voters

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http://www.npr.org/2016/10/22/497026533/from-pot-to-guns-to-school-funding-heres-whats-on-the-ballot-in-your-state

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http://www.businessinsider.com/private-equity-companies-focus-on-marijuana-2016-7

http://www.azcentral.com/story/news/politics/elections/2016/10/23/searching-colorado-arizona-marijuana-future-prop-205/92529926/

http://www.washingtontimes.com/news/2016/jul/8/marijuana-sales-washington-top-1-billion-report/

Will California’s Proposition 64 turn the tide in the weed war?

http://www.liq.wa.gov/pressreleases/lcb-to-increase-number-of-retail-mj-stores

http://www.oregonlive.com/marijuana/index.ssf/2016/08/oregon_collects_255_million_in.html

http://www.businessinsider.com/private-equity-companies-focus-on-marijuana-2016-7

http://sacramento.cbslocal.com/2016/09/28/prop-64-how-much-money-could-legal-weed-bring-in-and-where-will-it-go/

https://www.adn.com/alaska-marijuana/2016/07/12/heres-where-half-of-the-revenue-from-alaskas-legal-pot-will-go/